It's time to bet on a big energy rally: Goldman

The level of bearishness around oil stocks has become "extreme," and it's time to play for an energy snapback. So argues Goldman Sachs' options team, which goes on to recommend a bullish play on energy stocks.

Examining options market pricing, Goldman's John Marshall and Katie Fogertey observe that nervousness about increased oil-price declines have shot up, as more and more investors appear to have taken to the options market to hedge their exposure or to make outright bearish calls.

Marshall and Fogertey grant that such positioning indicators are of limited use when it comes to making long-term calls. But in the near term, any shift in position is likely to be a "tailwind."

In order to play for a sentiment-driven spike, the strategists recommend buying calls on the SPDR Energy Sector ETF (XLE). Specifically, they recommend buying the March 58-strike calls for $1.30 per share — a bet that will pay off if the energy ETF rises above $59.30 by mid-March, which is 10.5 percent above Wednesday's closing price.

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